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Commentary: Don't Waste A Huge Opportunity In Africa

April 05, 1998

News: Analysis & Commentary: COMMENTARY

COMMENTARY: DON'T WASTE A HUGE OPPORTUNITY IN AFRICA

Finally, it's Africa's turn. As President Clinton told a massive crowd in Ghana on the first leg of his six-nation tour on Mar. 23, "It is time for Americans to put a new Africa on our map." He wants the U.S. to take the lead in helping Africa plot a new path--toward democracy, market reform, and self-reliance.

Cynics view Clinton's 12-day visit--the first by a U.S. President since Jimmy Carter--as a welcome diversion from his personal scandals. But it can be far more. The trip is a belated recognition of the vast potential of Africa, a continent that in the post-cold war era no longer has to be a battleground between capitalism and communism. The new models are Botswana, with a two-party democracy and a 5.5% growth rate. Or Ghana, which has modernized its phone, electric, and road systems while privatizing gold mines. In Uganda, growth is running above 6%, thanks to market reforms.

Further progress depends on expanded trade and investment, areas on which the Clinton Administration wisely plans to focus. But unless the U.S. Senate passes a bipartisan economic stimulus package for the continent, Clinton's trip will be in vain.ALL IN OIL. While still relatively minuscule, trade between the U.S. and the 48 nations of sub-Saharan Africa grew at the same 32% rate as trade with the rest of the world over the past three years. And although Africa accounts for just 1% of America's exports and 2% of its imports, the U.S. is Africa's leading market, purchasing 19% of exports since 1994. Unfortunately, 90% of U.S. purchases from Africa involve oil, which provides less economic payback than manufactured goods. Africa, for example, gets little out of U.S. programs that grant duty-free treatment to manufactured products from developing nations. "Foreign aid alone has not led to the kinds of growth and diversification that increased trade would produce," says U.S. Trade Representative Charlene Barshefsky.

The Administration supports a House-passed trade bill called the Africa Growth & Opportunity Act, which would grant further preferences for textiles and clothing in return for market reforms. But the bill faces opposition because it could cost jobs in a U.S. apparel industry that has already been hit hard by competition from abroad. Even so, the measure would just hasten the inevitable: Protective import quotas on textiles are scheduled to be phased out by 2005. The U.S. International Trade Commission, an independent agency, notes that further domestic job losses would be minimal, since Africa accounts for less than 1% of U.S. textile imports.

The trade bill would also allow duty-free zones in countries that are making progress in moving toward a market economy and improving human rights. It would establish two funds to invest $650 million in African business and infrastructure and order the Export-Import Bank to expand loans, guarantees, and insurance to Africa.

More important, the bill would help highlight the continent as an investment opportunity. Coca-Cola Co., for example, recently endorsed a new business plan for the region that foresees 15% growth rates. Today, Africa accounts for 7% of the company's customers but only 4% of sales. "We see an Africa more directly accountable for its own destiny than it has been for centuries," Coke CEO M. Douglas Ivester said recently.CIVIL STRIFE. Africa still has enormous problems, including a crumbling infrastructure, endemic corruption, and civil wars. Market economies are just taking hold in formerly socialist nations such as Tanzania, and decades of mismanagement have wrecked the economy of the Democratic Republic of Congo (formerly Zaire). Protracted internal conflicts have ruined the neighboring nation of Republic of the Congo as well as Burundi and Sudan. Nigeria is widely considered one of the most corrupt nations in the world.

But these problems also create huge opportunities for improvement: A recent Transportation Dept. study notes that a dollar invested in the African transportation grid would likely return more than a dollar in increased economic activity every year. Indeed, Africa is ready for a new kind of exploration that will benefit investors, traders, and 750 million inhabitants.By Paul Magnusson & Dean Foust